It Takes R&D to Spell Innovation

5,300 Workers Stand Up for R&D

It’s pretty rare that 5,000 people agree on anything, but that’s what happened today as thousands of R&D professionals from 135 companies and 44 states sent a letter to Congress urging lawmakers to immediately extend and make permanent the research and development tax credit before it expires on December 31.

The credit goes to support American innovation efforts that help keep the country competitive.  And, failure to extend the credit would pull the rug out from under an economy that is struggling to regain its footing.

With 70 percent of the credit going to pay R&D employee salaries and wages, letting the credit expire would put 120,000 U.S. jobs at risk and cost $45 million in lost economic activity, according to a report released last month by TechAmerica.

“Research and development keeps our companies on the cutting edge of global competitiveness. R&D brought us smart phones, airplanes, vaccines, hybrid cars, the artificial hip and much more,” the employees wrote. “U.S. companies employ high-skilled, high-wage workers across America that depend on the R&D tax credit for maintaining the nation’s leadership in biotechnology, manufacturing, technology, and other business sectors in the U.S.  If the credit expires on December 31, it will place America’s innovation economy at risk.”

The U.S. House is scheduled to vote on a tax extenders package today that would extend the R&D tax credit for one year, but the credit’s future remains terribly uncertain.    

As President Obama noted earlier this year, “This is a tax credit that returns $2 to the economy for every dollar we spend. Yet over the years we’ve allowed this credit to lapse or we’ve extended it year to year—even just a few months at a time. Under my budget, this tax credit will no longer fall prey to the whims of politics and partisanship. It will be far more effective when businesses like yours can count on it, when you’ve got some stability and reliability.”

While R&D is part of American DNA, it is not something that comes cheap. R&D is expensive, and it takes planning to bring those ideas to the marketplace. Our ability to pay for R&D, to map out the future of the products it creates, and to keep those Americans involved in one of our most important enterprises are threatened by congressional inaction over the R&D tax credit.

It’s important to remember that United States isn’t the only nation that gives R&D incentives. While Congress is slow to renew the credit, other nations are not. When the R&D Credit was first created, the U.S. had the distinction of providing the most generous tax treatment for research among all OECD nations. Today, that is not the case because the credit has been whittled away over the years due to our global competitors such as Canada, China, Japan and others that offer more aggressive R&D incentives. In fact, the U.S. has fallen out of the top 10 globally when measuring government incentives for private sector R&D and now measures 17th.

Congress needs to heed the call of the 5,300 R&D men and women across this great nation.  The employees who signed onto the letter represent thousands more who toil everyday in labs, research facilities, machine shops and other facilities across the country, who help America invent its way to a brighter future.  

 

Congress Should Grant R&D Wish

As of today there are only 20 shopping days left before Christmas. But as important as holiday spending is for the economy, there are only 27 days left before the research and development (R&D) tax credit expires.

Congress could give the economy a Christmas present and extend the R&D tax credit, or it could put a lump of coal in the stockings of the thousands of workers across the nation that depend on the credit for good, high-paying jobs.  

The credit isn’t just some bit of tinsel: it spurs the creation of U.S.-based innovation and economic activity. It fosters private-sector R&D investment by companies of all sizes and brings new, improved products and services to market.

The list of these is nearly endless: energy-efficient appliances, new vaccines, faster Internet and communications capabilities, safer transportation, and improved national security, to name just a few. Innovative ideas become reality when American companies make a strong commitment to invest in our future national prosperity. 

But most importantly, the provision is really a “jobs credit” since 70 percent or more of its benefits are attributable to salaries of workers performing U.S.-based research. Only R&D performed in the United States may qualify for the R&D credit.  The credit stimulates innovation-producing R&D investments in all 50 states across nearly 18,000 small, medium and large companies, according to a 2008 report by Ernst & Young for the R&D Credit Coalition. 

The credit’s renewal is important because these businesses cannot make important R&D decisions without it. R&D projects take a long time and require big investments up front. Without the credit, many critical projects across the nation simply won’t get started, will end, or will get shipped overseas where even more generous incentives await. While time is running short, it’s not over.

The White House supports a permanent R&D credit, and more than 400 companies recently sent a letter to Congress asking them to extend and strengthen the credit as a way to spur investment.

Also, 34 technology company CEOs sent a letter to Obama asking for his intervention on saving the credit. “To remove the uncertainty that is deterring businesses from making investment and hiring decisions, action is needed both in the immediate and long term,” the CEOs wrote. “Before the end of this year, we encourage enactment of a permanent extension of a strengthened research and development tax credit and other key business tax incentives set to expire at the end of this year.”

Still, Congress seems to have its sled stuck at the North Pole. Lawmakers don’t seem willing to make the holiday season a little brighter for all those workers who depend on the R&D credit. They might get in the spirit a little faster if people picked up the phone and let them know that the R&D tax credit is more than just some hypothetical item on the wish list.  

 

Obama Schools the Nation as White House Seeks to “Educate to Innovate”

President Obama announced a new initiative Monday morning as part of the White House’s attempt to reestablish the United States as the leading research and development powerhouse. The announcement of the “Educate to Innovate” campaign – a nationwide effort to help move American students from the middle to the top of the pack in science and math – is more recognition by the administration of the importance of R&D. Educating the next generation of scientists, engineers and researchers is critical if the United States wants to regain its role as an R&D leader.

Obama told a packed audience at the White House briefing that the $260 million public-private effort is designed to allow young people get “the chance to build and create – and maybe destroy just a little bit – to see the promise of being the makers of things, and not just the consumers of things.”

During the Webcast address, he told the nation that science and math should be on par with athletic achievement. “If you win the NCAA championship, you come to the White House,” he said “Well, if you're a young person and you've produced the best experiment or design, the best hardware or software, you ought to be recognized for that achievement, too. Scientists and engineers ought to stand side by side with athletes and entertainers as role models, and here at the White House we're going to lead by example. We're going to show young people how cool science can be.”

Among the initiatives announced by the President are:

• Five public-private partnerships that harness the power of media, interactive games, hands-on learning, and 100,000 volunteers to reach more than 10 million students over the next four years, inspiring them to be the next generation of makers, discoverers, and innovators. These partnerships represent a combined commitment of over $260 million in financial and in-kind support.
  

• A commitment by leaders such as Sally Ride (the first female astronaut), Craig Barrett (former chairman of Intel), Ursula Burns (CEO, Xerox), Glenn Britt (CEO, Time Warner Cable), and Antonio Perez (CEO, Eastman Kodak) to increase the scale, scope, and impact of private-sector and philanthropic support for STEM education. This coalition, with the support of the Bill and Melinda Gates Foundation and the Carnegie Corporation of New York, will recruit private sector leaders to serve as champions for STEM (Science, Technology, Engineering & Math) at the state level; mobilize resources to help scale successful STEM innovations; and raise awareness of the importance of STEM among parents and students.
  

• An annual science fair at the White House, showcasing the student winners of national competitions in areas such as science, technology, and robotics.

During the presentation, Obama included a demonstration of a robot “The Cougar Cannon” designed by students at Virginia’s Oakton High School. Using basketballs the Cougar Cannon simulates what a robot might have to do to transfer moon rocks from one place to another.

“I am eager to see what they do – for two reasons,” he said. “As President, I believe that robotics can inspire young people to pursue science and engineering. And I also want to keep an eye on those robots, in case they try anything.”

Joking aside, the administration continues to show a commitment to R&D. The White House has pushed for an enhanced R&D tax credit that they would like to see made permanent. That commitment needs to extend to the Congress where the credit has been languishing, and could expire by year’s end.

On the days before Thanksgiving – one of the most American holidays – we need to take what Obama is saying to heart. We should give thanks for the innovative spirit that infuses the American character, but we need to ensure that spirit has a chance to grow.

As Obama said: “There is a hunger for knowledge, an insistence on excellence, a reverence for science and math and technology and learning. That used to be what we were about. That's what we're going to be about again.”

120K Jobs, $16 Billion in Economic Activity at Risk - If R&D Credit Expires

Letting the research and development tax credit expire at the end of the year will put 120,000 hard-working Americans on the street and cost $45 million in economic activity every day the credit isn’t in place, according to a just-released report. The report by the trade group TechAmerica underscored the salient facts about the credit: It works.

With the unemployment rate at more than 10 percent for the first time in decades, lawmakers need to ask themselves if the want to put even more jobs and important projects at risk by failing to act on the credit which expires on December 31.

“The realities of a global market and America’s dulling competitive edge should dictate a stronger, permanent incentive for research and development,” said TechAmerica President Phil Bond in a statement on the report. “The President and many important members of Congress support a permanent credit, but that support just has not translated into action. Meanwhile, companies planning for next year are left to wonder if even this, relatively modest, incentive will be there. We call upon the Congress: Do not turn your back on American innovation – and the American economy – by leaving this priority unaddressed.”

 First enacted by Congress in 1981, the Credit has fostered commercial R&D investment by American businesses of all sizes, helping to bring new or enhanced products and services to market. The list of R&D successes is nearly endless: energy-efficient appliances, new vaccines, faster Internet and communications capabilities, safer transportation, and improved national security, to name just a few.  Innovative ideas become reality when American companies are incentivized to make a strong commitment to invest in themselves and in so doing, in our future national prosperity.

 While the credit is a success, it is even more important now as businesses prepare for the new year. Congress allowed the credit to expire before, and each time it created problems for companies trying to make budget projections and contributing to the U.S. sliding farther behind other nations with better R&D tax policies. Congress needs to take action now, or risk making the unemployment picture worse and prolonging our economic struggles.

Hundreds of U.S. Companies Urge Congress to Pass R&D Credit

Today, more than 400 companies and business organizations from across the United States this week urged Congress to approve legislation to strengthen and make permanent the R&D tax credit before it expires on December 31, 2009.  The letter was organized by the R&D Credit Coalition. Studies show that more than 70% of the benefits of the credit are attributable to the salaries of workers performing U.S. based research.  President Barack Obama in recent months has called for the Credit to be made permanent.

In a letter sent to Congressional leadership and every member of the U.S. Congress, the companies wrote:

“Failure to enact a permanent and strengthened credit will have significant negative consequences for the U.S. economy and threatens investments we need to make in important areas of the economy such as renewable energy and energy efficiency technologies, health care, biotechnology, manufacturing processes, and information and communications technologies. Now is not the time to back away from the spirit of invention. Now is the time to embrace it wholeheartedly. Businesses need certainty to make long-term, high risk investments in the U.S. Furthermore, a strengthened credit will be more competitive with incentives provided by other countries that are vying for research investment dollars.

We respectfully urge you to approve legislation to strengthen and make permanent the R&D tax credit as soon as possible.”

 Earlier this year, President Obama said that the R&D Credit “returns $2 to the economy for every dollar we spend. Yet over the years we've allowed this credit to lapse or we've extended it year to year -- even just a few months at a time. Under my budget, this tax credit will no longer fall prey to the whims of politics and partisanship.”

Companies and organizations signing the letter to Congress represent virtually every industry sector from manufacturing, health care, energy, technology, pharmaceuticals, telecommunications, aerospace, agriculture, biotechnology and more.  A copy of the letter is available upon request and is available on the R&D Credit Coalition website at www.investinamericasfuture.org.

America’s R&D Lead is NOT Guaranteed

American’s racked up another science Nobel this year, not only securing the coveted prize in medicine, but marking the first time a woman has won the award. This time it went to a team of three researchers who were looking into an obscure problem in cell biology. Their discoveries were made 20 years ago when the scientists were doing basic research on a question that seemed to have no practical purpose. As it turned out, they unlocked a door that opened up our understanding of cancer and diseases related to aging.

The research by Elizabeth H. Blackburn of the University of California, San Francisco; Carol W. Greider of Johns Hopkins University School of Medicine; and Jack W. Szostak of Massachusetts General Hospital on what are known as telomeres, turned out to define when a cell stops dividing. This information is important because short telomeres play a role in certain diseases of aging, and in cancer -- a disease in which control of cell proliferation is lost.

In interviews published in The New York Times the scientists said the prize is an acknowledgement of the importance of doing basic research. It's an emphasis that is notably American, but might not stay that way.

Dr. Blackburn told the Times that he moved to the U.S. because it was a “notably attractive” place to do science, something that she warned “one shouldn’t take for granted.”

If we want to keep winning those Nobels, and benefitting from that kind of research, we need to enact policies that engender discovery. That research is expensive, time consuming, often leads to more dead-ends than Nobels, but is critical for the American economic health.

Dr. Blackburn wasn’t attempting to get down in the weeds of public policy, but her warning points out the need for policies like the research and development tax credit. The  R&D Credit encourages businesses to increase U.S. based research and development projects. As often as not, it funds research that sometimes seems to have no practical purpose, but in the end leads to discoveries that create jobs, save lives and give America the right to be proud.

Unfortunately this valuable tool is at risk. Congress has yet to extend the R&D credit, despite it’s proven effectiveness. It’s time for Congress to act on the credit so we can spur on the economy, and maybe rack up a few more of those little Swedish prizes.

Let's Go Fishing: Pass the R&D Tax Credit Now

There's an old saying about fishing.  If you give a man a fish, he eats for a day.  If you teach him how to fish he eats for life.  The research and development tax credit is kind of like that story.  With the President's call for a permanent credit, it's clear that the Administration knows the difference between a meal and the food chain. 

“This is a tax credit that helps companies afford the often high costs of developing new ideas, new technologies, new products -- which means new jobs,” he said.  “And this tax incentive returns two dollars to the economy for every one dollar we spend. Time and again, I’ve heard from leaders -- from Silicon Valley to the Tech Valley -- about how important it is.”

Obama may not be a fisherman, but he has the right idea here.  It’s time for Congress to stop cutting bait and pass the R&D Tax Credit. Then we can all go fishing.

R&D 2.0

Businessweek has a great series of articles on the important subject of research and development to America's future growth. Written by Steve Hamm, the magazine points out how important R&D is to the future of the country.

"Once upon a time, the U.S. was the world's unrivaled innovation leader. America had the best universities, the strongest corporate research, and a government that invested  aggressively in things like space exploration and advanced communications. The result was a steady stream of world-changing innovations, from the transistor at Bell Labs to the Internet at the Defense Dept. The country's leadership is no longer unrivaled. While the U.S. still tops most global rankings for research investment and productivity, aggressive countries from Asia and Europe are closing the gap. This shift creates both a challenge to the U.S. and an opportunity for a new kind of innovation. The key is recognizing that the future of research will transcend national boundaries and corporate walls."

The magazine laud IBM for their efforts on this front to link governments, universities and businesses for new areas of research. Take a look, its shows that government has a role too. But the bottom line is that we agree with Hamm's assessment that "Research breakthroughs are especially important at a time of turmoil. They can lay the foundation for the industries and jobs of the future. But they won't happen without creativity from companies and governments." Well said.